Failure to pass on input tax credit: profiteering must be refunded with interest; penalty provision held non retrospective.
Respondent found to have realized an incremental input tax credit benefit of 0.92% post-GST and failed to pass this benefit to homebuyers in breach of the pass on obligation under Section 171(1), and was directed to disburse the quantified profiteered amount with applicable interest to eligible buyers within thirty days in accordance with buyer wise computations. The penal provision introduced later is not retroactive, so penalty for the contravention period (01.07.2017-31.03.2019) cannot be imposed.
Issues: (i) Whether the Respondent failed to pass on the additional input tax credit benefit to homebuyers in contravention of Section 171(1) of the CGST Act, 2017; (ii) Whether penalty under Section 171(3A) of the CGST Act, 2017 is applicable for the period of contravention (01.07.2017 to 31.03.2019).
Issue (i): Whether the Respondent failed to pass on the additional input tax credit benefit to homebuyers in contravention of Section 171(1) of the CGST Act, 2017.
Analysis: The DGAP's reinvestigation found the ratio of ITC to purchase value increased from 13.80% pre-GST to 14.72% post-GST, reflecting an incremental benefit of 0.92%. The Respondent accepted the DGAP findings and agreed to pass on the quantified profiteered amount along with applicable interest. The Tribunal examined the DGAP report, the computations, the respondent's acceptance, and statements of the applicants.
Conclusion: The Tribunal concluded that the Respondent derived an additional ITC benefit of 0.92% during the post-GST period and failed to pass on the benefit to homebuyers, thereby contravening Section 171(1) of the CGST Act, 2017; the DGAP report is accepted.
Issue (ii): Whether penalty under Section 171(3A) of the CGST Act, 2017 is applicable for the period of contravention (01.07.2017 to 31.03.2019).
Analysis: Section 171(3A) came into force with effect from 01.01.2020. The period of contravention determined in the investigation is from 01.07.2017 to 31.03.2019. The Tribunal assessed temporal applicability of the penal provision to the determined contravention period.
Conclusion: The penalty provision under Section 171(3A) of the CGST Act, 2017 is not applicable retrospectively to the period 01.07.2017 to 31.03.2019; penalty cannot be imposed for that period.
Final Conclusion: The DGAP report dated 26.03.2025 is accepted; the Respondent is directed to pass on the profiteered amount of Rs. 47,71,823 along with applicable interest in terms of Rule 133(3)(b) of the CGST Rules, 2017, to eligible homebuyers in accordance with the buyer-wise computation within thirty days and to submit compliance evidence to the DGAP and the jurisdictional GST Commissioner(s).
Ratio Decidendi: Where a penal provision is brought into force after the period of contravention, that provision cannot be applied retrospectively to impose penalty for conduct occurring prior to its commencement; however, findings on failure to pass on additional input tax credit under Section 171(1) are enforceable by directing disbursement of the profiteered amount and applicable interest under Rule 133(3)(b) of the CGST Rules, 2017.